By: LINDSEY O'NEILL, ESQ
The Georgia couple who just won the $270 Million lottery seem to be the media favorite right now for the nicest couple to ever win the lottery! With big lottery jackpots like this, many of us wonder just what it would be like to actually win the lottery.... Since this is a legal website, I started wondering about the legal aspects of winning the lottery. Actually, there are many legal issues lottery winners must address at one point or another. Know this - if you win the lottery, it is highly recommended you consult with an attorney prior to claiming the winning ticket so that the various legal issues can be addressed and winning the lottery can be a good thing .... and not turn into nightmare. Some of the legal issues include the following:
1. What about privacy and the identity of lottery winners? Most winners' names are published in the media, which can translate into a loss of privacy previously enjoyed. Some argue that the winners’ names should be published so that the public can be assured the state isn't just keeping the money. Others argue that the celebrity created by a lottery winning can have negative consequences on lottery winners in terms of unwanted publicity. Depending on the circumstances, you may be able to protect your privacy by the way in which you choose to recieve the winnings. For example, there may be legal entities that can be created to in an effort to help mask your identity and save you from a fifteen-minutes-of-fame-gone-wild situation.
2. What about taxes on the winnings? Lottery winnings are considered taxable income. Whether received as a lump-sum payment or in multiple annual payments, the winnings are taxed as received. A trust may be a good option to hold the lottery winnings. Some of the tax advantages of a trust may include avoiding probate of the lottery proceeds upon death of the winner and minimizing taxes on the estate.
3. How must lottery winnings be split if the ticket was purchased jointly or by a pool of individuals? Many times lottery tickets are purchased with pooled funds from friends or colleagues. Was there verbal agreement to share the winnings with another person? Can that agreement be enforced under applicable state laws? (Some states prohibit contracts for gambling.) If multiple individuals own the winning ticket, a partnership may be a good entity to form to receive the winnings on behalf of all of the partners, rather than one individual receiving the checks.
4. Must the winner share the winnings with a spouse or a live-in significant other? Lottery money may be considered a marital property acquired during the marriage, particularly if the ticket was purchased with marital funds, and may be subject to division upon divorce. Even if the parties are not married, but are significant-others who live together, share living expenses, and have a regular practice of buying lottery tickets each week, there may be a joint-right to the winnings. Courts typically focus on the facts and circumstances surrounding the particular situation including the intent and understanding of the parties in order to ascertain the legal rights of the individuals.
5. Can the winner(s) gift some of the money to family and/or friends? A lottery winner can make a gift of some of the lottery winnings up to the annual exclusion limit without incurring gift tax liability. Making annual gifts in this fashion is a good way to share the winnings with family members and friends while mitigating the tax implications. Gifts made to another person's education or medical care may have favorable tax treatment as well. Finally, gifts to charities can have certain attractive tax advantages for the lottery winner.
When a person wins the lottery, the advice and consultation of an experienced estate planning and tax attorney can be a huge advantage when dealing with the various legal and related issues. Ideally, a lawyer should be consulted prior to claiming the lottery prize so that the appropriate legal mechanisms can be put in place to minimize the hassles that may otherwise be associated with collecting the winnings. Use the attorney locator service on LawInfo's home page to find an attorney in your area: http://www.lawinfo.com/.
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